linking kpis to critical human capital questions webinar
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7/30/2019 Linking KPIs to Critical Human Capital Questions Webinar
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August28,2013
HumanCapitalManagementInstitute
Presents:
LinkingKPIstoCritical
HumanCapitalQuestions
HUMAN CAPITALMANAGEMENT INSTITUTE
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AboutHumanCapitalManagementInstitute
HCMI Background:
SpecializedinHRanalysis&measurement
DeepexpertiseinWorkforceAnalytics&Planning
BoardmadeupofCFOsandHRheads
What We Do:
Measuretheimmeasurableinhumancapital
Transformworkforcedataintobusinessintelligence
Providetechnology,consultingandtrainingsoHRcanpartnerwithFinance
2
SOLVEWorkforceIntelligenceSoftware StrategicConsulting Training
BestPractices WorkforceAnalyticsandPlanning Benchmarking
TheHumanCapitalManagementInstitute(HCMI)wasfoundedonthebeliefthatorganizationscanandmust,findbetterwaysofmeasuringtheirinvestmentsinhumancapital.Ourvisionofthefutureisoneinwhichhumancapitalmeasurementandinformationisasintegraltobusinessdecisionmakingasfinancialinformationistoday.
We
Bring
Financial
Discipline,
Standards
and
Rigor
to
the
HR
Function
HumanCapitalManagementInstitute
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HCMIProductsandServices
HumanCapitalFinancialStatements HumanCapitalImpactStatement HumanCapitalAssetStatement
HumanCapitalFlowStatement
WorkforceQuantifierROICalculator ROIofWorkforceDecisions CostofTurnover,WorkforceCost,CostperHire BusinessCaseforHRInterventions
DataIntegrationBlueprint ModularTalentManagementComponents DetailedDataDictionary+MetricFormulas KeyAnalysisSegmentsandDimensions
HumanCapitalMetricsHandbook Over600MetricsandDetailedDefinitions Morethan100KPIandBestinClassMetrics UniqueMetricsthatMonetizeHumanCapital
WorkforcePlanning LinkWorkforceandFinancialMetrics AdvancedRetirementCalculator ForecastSkills,Costs,TalentandProductivity
JobFrameworkMapping
IntegratedTaxonomy15,000+jobs MapCriticalJobRoles
WorkforceCapabilityAssessment DataandSystemsCapability+RiskAnalysis HumanCapitalMeasurementStandards
SpanofControlOptimizerTool BenchmarkandOptimizeSpans OptimizeManagementLayers
CareerPath
Quantifier
ROIofCareerPath Build,Buy orLease TalentAnalysis
AnalyticEngagementProjects HighPerformerProfiles EngagementROIandSalesImpact TurnoverandRetentionDriverAnalysis
InitialReports& Analysis
DataGathering
FirstGoodMetrics
HRData WarehouseDrilldown,standardreports
ScenarioAnalysis
External
BenchmarkingContextfordecisions
DataDriven Decision
Making!
Turnover,Headcount,Hiring
HRISsystemdata
COEFormation
DataErrors
HRAnalytics
Mandate
HRStandardsEstablishedLost HR
Credibility
HRdata/systemsAssessed
HRData Cleansedhistoricaldatascrubbed
Bus.UnitsReject
Analysis
Data Errors
Historicaldatastillbad
1stAnalyticsStudy
Advanced
AnalyticStudies
HRAnalysis
ValidatedIntegratedHRDatabases
COELaunchesTraining
Courses
Bus. UnitsDemandmore
Analyticsjourneysteps
Setbacksalongtheway
Journeypathandgoal
HRRoadmapDesign StepbyStepActionableDeliverablesandInsights Mapfor,Systems,Data,Tools,Skills,Metrics+more
TrainingandAdvisorySupport Expert,Guided,StandardandCustomized OngoingAdvisorySupportServices BeginningandAdvancedTraining
SOLVEWorkforceIntelligenceSoftware IntegratedDashboard,AdvancedTools,Metrics,
DataBlueprintandPredictiveModeling AutomatedCompletionofHCFS
StatisticalSales
Predictor
PredictRevenuebyEconomic/WorkforceFactor LinktoEconomicDriverstoWorkforceMetrics
HumanCapitalManagementInstitute 3
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Background:MeasuringHumanCapital
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MeetingtheNeed:WhatDoesitTake?
WorkforceMeasuresthatLinktoBusinessResults
Asinglepointofdataisnotenoughtomakeastory
We
need
context
to
show
value
and
explain
the
linkage
Historicaldataisimportant,predictivedataiscritical
What
will
our
workforce
will
look
like
in
5
years
? Wherearewegoing,thenwelldecideifweneedtochangecourse?
Dataisnotenough,analyticsmustshowstoriesandinsights
Whatareourcriticalworkforceissues?
Whatareourcriticalworkforcemetrics?
HumanCapitalManagementInstitute 5
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TheChallengeofMeasuringHumanCapital
Compensation
Transfers
New HireTurnover
SuccessionData
Turnover
Training
Recruiting
EmployeeData
Benefits
Span
of Control
Workforce
Planning
SuccessAdvanced
Analyti cInsights
ComplexityofWorkforceData
Employee/FullTimeEquivalent(FTE)
Jobs/Roles/Skills
Time Tenure
Compensation($vs.Equity)
Frequencyof
Change
Promotions,Transfers,Hires,Terminations
Jobs/Roles/Skills
Time Tenure
MeasuringtheIntangible
LackofStandards
LackofAnalyticSkills
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WorkforcePlanningvs.WorkforceAnalytics
HumanCapitalManagementInstitute 7
WorkforceAnalytics
WorkforcePlanning
Present
Future
Past
PredictiveAnalytics
Trend
Analysis
Workforce
Knowledge
Key
Performance
Indicators
WorkforceOptimization
FutureScenarios
Workforce
PlanningPlanningandAnalytics
WorkforceAnalytics
WorkforcePlanningandAnalyticsLinkageStrong WorkforceAnalyticsinsightsenable
futureWorkforcePlanningsuccess.
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TheMetricsJourney
BaseData NoMetrics
CalculatedMetrics(e.g.TurnoverRate)
SimpleMetrics(e.g.Headcount,Terminations)
CombinedSourceMetrics(e.g.TimetoProfitability)
InsightfulMetrics(e.g.RevenueperFTE)
AdvancedMetricscombinedcalculatedmetrics(e.g.CareerPathRatio)
IndexMetrics(e.g.NewHireSuccessRate)
ComplexIndexMetrics(e.g.QualityofHire)
HowdoyouStackUp?
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MetricsandtheTalentManagementLifeCycleQuantifying
Workforce
and
HR
Impact
Whatareyourorganizationskeymetricsateachtalent
managementlifecyclestage?
Howareworkforce
productivity,valueandimpactcalculated?
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Recruiting&Hiring
Training
(L&D)
Performance&
Engagement
MobilityCareerPath
Turnover&Retention
Leadership&
Management
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LinkingKPIstoCritical
HumanCapitalQuestions
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AnsweringtheRightQuestions
WhatIfHRcouldanswerthefollowing:
1. Whatisourworkforceproductivity?Isitimproving?Howdowerank?
2. Isitbettertobuild,buyorrenttalent?Whatistherightworkforcecost?
3. Areleaderseffectivelymanaginghumancapital? Doleaderscorrelatetoemployee
engagement,retentionandperformance?
4. WhatistheROIonourtraininginvestment?
WhatWorkforceandBusinessIssuesdoyouFace?
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Question1:WorkforceProductivity
HCROIRatio =(Revenue (TotalExpenses TotalCostof
Workforce))/TotalCostofWorkforce
HumanCapitalManagementInstitute 12
Question:
Whatisourworkforceproductivity?Isitimproving?Howdowerank?
Metric:
Description:
Net operating profit impact of each dollar invested in human capital.
Background:Organizations tracking Human Capital ROI Ratio can effectively measure the linkage of overalltrends in market value over time (for publicly traded or other organizations for which a relativemarket value is obtainable). Ideally, this metric should be used for long term strategicpredictions rather than short term measurement as market value can fluctuate dramatically dueto uncontrollable events as well as industry and market changes.
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Example1:WorkforceProductivity
Traditional
Productivity
Metrics
Leading
Productivity
Metrics
SummaryHumanCapitalImpactStatement
HumanCapitalROIRatio PriorYearCurrentYear%Chg
RelativeValueAdd
(Productivity)by
JobGroup
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CaseStudy1:ProductivitybyJobCategory
QuestionsAnswered
WhichJobsHavetheHighestROI?
WhichJobsCreatetheMostValueRelativetoCost?
WhichJobsHavetheBestOpportunityforTrainingInvestment?
Human Capital ROI Ratio by Job Family
HumanCapita
lValueAddROI
HumanCapitalROIRatiobyJobCategoryFinancialServicesCompany
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Question2:TotalCostofWorkforce
HumanCapitalManagementInstitute 15
Question:
Isitbettertobuild,buyorrenttalent?Whatistherightworkforcecost?
Metric:
TCOWIncludes:
TotalCostofWorkforce =TotalCompensationCosts+
BenefitsCosts+OtherWorkforceCosts
Employeecompensation (salaries/wages,incentives,overtime,equityandotherpay)
Contingenttemporary/contractlabor (costs)
Employeebenefits andperks(costs)
HRfunctioncost (e.g.,recruiting,trainingandsupport)
Retiree orinactiveworkforcecosts(costs)
AdditionalMetricsforConsideration:
Internalvs.ExternalCompensationCostDifferential,Internalvs.ExternalRecruitingCostDifferential
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TheBottom
Line
Managing
Workforce
Costs
Existingcostcontroltoolsdontwork(Budget?)
Statusquodrivesbinge(hiring)/purge(layoff)cycles Offshoring/Outsourcingreducescostsbutnotcompetition
HowdoesTCOWcontrolcosts? Settargetstobudget,forecast,benchmarkorimprovementgoals Linktonewhirerequisitions,hiringfreezes,bonusincentivepayouts Benchmarkbusinessunitandorganizationalperformance
TCOWasa%ofRevenueorasa%ofTotalExpenses
1%TCOWsavingsataFortune500Co.=$30million
Example2:TotalCostofWorkforce
Example: Business Case for Total Cost of Workforce
An organization with 100,000 employees at the end of 2011 and 100,000 employees at the
end of 2012 would appear to have effectively controlled workforce cost by managing totalworkforce headcount.
However, due to increases in benefits, wages, and changes in the workforce such asbonuses, promotions, and mix of jobs hired, organizations with flat headcount growth caneasily (and often do) experience 10% or greater increases in Total Cost of Workforce.
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CaseStudy2:TotalCostofWorkforce
Career
Paths:
Employees
are
Assets
to
be
Developed
StaffAccountant
Mgr.,Accounting
Dir.,Accounting
Accountant
Sr.Accountant
CAGR:CompoundAnnualGrowthRate
Account ing Job Family Career Salary Progression
$46,400
$49,600
$59,800
$67,000
$79,100
$94,000
$40,000
$50,000
$60,000
$70,000
$80,000
$90,000
$100,000
0 1 2 3 4 5 6 7 8 9 10 10+
Years of Experience
BaseS
alary
Staff Accountant
Accountant
Sr. Accountant
Mgr., Accounting
Dir., Accounting
Ave Annual Rate
Market Rates
(50%-75%ile)
CAGR = 10.0%
$130,000
CAGR = 6.6%
Entry level Staff Accountant
hired at 50%ile needs annual
salary growth of 10.0% to stay
with market(Assumes mkt growth of 3% annually
w progression to . Director in 10
years.)
50th %ile
ThetenyearcostsavingsistheareabetweenthecostofExternalHirescomparedtothecareerpathofanInternal
StaffAccountant
HumanCapitalManagementInstitute 17
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Question3:LeadershipEffectiveness
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Question:
Areleaderseffectivelymanaginghumancapital?Doleaderscorrelatetoemployeeengagement,retentionandperformance?
Metric:
Aholisticmeasureencompassingamanagerstotaltalentmanagement
practicalresultsandimpacts Designedtoholdseniormanagementaccountablefortalentmanagement
Ideally,indexmetriccomponentsshouldbecalculatedonanindividualmanagerbasis
TalentManagement
Index
=Combinationofselectkeymetrics,
weighedbyimportanceandimpacttotheorganization
Background:
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Example3:LeadershipEffectiveness
CareerPathRatio
20%
NewHireHighPerformerRate
Mobility
HighPerformerTurnoverRate
or
HighPerformerRetentionRate
%ofHighPerformers
Performance
ManagementTurnover
and
Retention
OverallEmployeeEngagementRate
EmployeeEngagement
Index
20% 20% 20% 20%
Recruitingand
Hiring
TalentManagementIndexThe Talent Management Index is a holistic measure encompassing a managers total
talent management practical results and impacts. Such a metric can be used as anincentive compensation modifier. It is designed to hold senior managementaccountable for Talent Management. Ideally, all index metric components should becalculated on an individual manager basis.
TalentManagementIndex
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CaseStudy3:LeadershipEffectiveness
Canyouquantifywhichofyourmanagersaremoreeffectiveatmanagingtalent?
ManagerA ManagerB
Exceedsbusinessgoals
Hiresexpdemployees Notraining
Highturnover
Lowmobility
Mixedperformance
LowEngagement
Exceedsbusinessgoals
Hiresjunioremployees
Trainsteampersonally
Lowturnover
Moretransfers/promotions
Highemployeeperformance
Highengagement
ManagementGroup
PercentofManagers
PercentofTurnover
30%
34%
22%
14%
10%
81%
8%
2%
LowTurnover
HighTurnover
NewManager*
1Employee**
ManagerQualityisakeycomponentofemployee
turnover Cohortanalysis issegmentingbyhighandlow
turnovermanagers
Result: Spotting managerswithturnoverdisproportionatetoworkforcesize
1%
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Question4:ROIofTraining
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Question:
WhatistheROIonourtraininginvestment?
Metric:
Notalltrainingiscreatedequal!
Focusoncriticalrolesandworkforcegroupssuchassales,operations,customerservice,andmanagement
Measureimpactofperformance,engagement,productivityandretention
TrainingPerformance
Differential
=
TotalProductivity,OutputorPerformanceAfterTraining/Total
Productivity,OutputorPerformance
BeforeTraining
Background:
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CaseStudy4:ROIofTraining
Retail
Sales
Atalllevelsoftenure,Salespositionscompletingsomeorallcompanycourseshavehigherproductionthanthosethathavenot.
Positionswith>3yearsoftenurecompletingallcompanycoursesproduceover$250,000USDmorerevenueannuallythanthosewithsimilartenureandnotraining.
Coursescompleteddoesnotcorrelatewithtenure;manytenuredsalespeoplehavenotcompletedcompanycourses.
SalesRepsthatcompletesome/allmodulesaremorelikelytobefromcertain
locations.Trainingresultsinthemost$benefitattheselocationsversusothers.
KeyFindings:
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NextSteps
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MetricsLinking Financial Results to Human Capital
Productivity/ValueCreation
Impact
Low Medium High
High OpenPositionLostRevenueor
ProductionperDay 3
MarketCapitalizationvalueper
FTE2 ManagementSpanofControl
HighPerformerProductivityDifferential
AveTrainingPerformanceDifferentialperEmployee
EmployeeEngagementRevenueLinkage
QualityofHireIndex
ProfitperFTE2
TCOW1 perFTE2
HumanCapitalROIRatio
Internalvs.ExternalHireCompensationDifferential4
AveReplacementHireCompensationCostDifferential
TCOW1 %ofRevenue
TCOW1 %ofExpenses
RevenueperFTE2
AverageCostofTurnover
TrainingInvestment perFTE2
ReturnonHumanCapitalInvestment
EmployeeEngagement Index
TalentManagementIndex
TrainingEffectivenessIndex
HighPerformerTurnoverRate
Low
Job Tenure
TimetoFill
CostperHire
CareerPathRatio ManagerialBenchStrength
Experience&EducationIndex
AvgInternalvs.ExternalCostperHire
Differential
(1.) TCOW =Total Cost of Workforce(2.) FTE =Full Time Equivalent Workforce
Link
to
FinancialResults
(3.) Listed in Human Capital Financial Statements as Average Lost Revenue or Production per Day per Position(4.) Listed in Human Capital Metrics handbook as Internal vs. External Hire Compensation Difference
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WorkforceAnalyticsBusinessCaseROIExamples
15%ProductivityGain:OutputUp,CostsDown ($55.0BillionPackageDeliveryCo.)
5%ReductioninCostofWorkforce(TCOW)(Fortune30TechnologyCompany)
ProfiletoHireSalesStarswithSuperiorPredictiveMetrics($1.0BillionBank)
ROIofSalesTraining($2.0BillionRetailCo.)
EmployeeEngagementServiceLevelRevenueImpact($1.0BillionPublicAirline)
40%VoluntaryTurnoverReduction (MidsizedPublicFinancialServicesCo.)
ROIofinternalvs.externalhires(PublicBank)
$1.1BillionAnnual
$650MillionAnnual
$264Million
Annual
$1.1millionperSalesperson
$250MillionAnnual$250kperSalesperson
$96MillionAnnual$5perflightpremium
$12Million
Annual
$6MillionAnnual
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SOLVEWorkforceIntelligenceSoftware
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SOLVEMethodologyOverview
WorkforcePlanning
WorkforceROICalculator
HumanCapitalFinancial
Statements
CareerPathQuantifier
ScenarioManager
AdvancedIndexMetrics
LocationOptimization
(InDevelopment)
WorkforceOverview
RecruitingandHiring
Performanceand
Engagement
Productivity Turnover Management
MobilityHumanCapital
FinancialStatements
Workforce
ROIandCareerPath
Dashboards
(BasicUserSuite)
TalentManagementDashboards
AdvancedToolset
(PowerUserSuite)
DataIntegrationBlueprint
WorkforceStandards
PrimarySystems
SecondarySystems
ExternalDatabases
SOLVE Wizard
1 2 3Foundation
(DataIntegration)
Outputs4
QuestionDrivenAnalyticsand
Planning
ActionableWorkforce
Insights
PredictiveFinancialand
WorkforceModeling
WorkforceLinkageto
BusinessResults
QuantifyWorkforce
ProductivityandROI
FilterAnalysisandReporting,Compare
ScenariosbyWorkforceGroup,Position,Region,
Location,Location,BusinessUnitandMore.
BuildScenarios,DetailedAnalysisand
ModelingforWorkforceGroups,
Positions,Regions,Countries,
Locations,BusinessUnitsandMore.
EELevelDataandDimensions,
ConfiguredforOrganization
SpecificDriversandAnalysis.
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WhatyouGetwithSOLVE
CEO/COO CFO
CHRO
HRFunction
Leads
CIO
WorkforceProductivity
ROIoftheWorkforce
HumanCapitalFinancialStatements
ToolstoControlWorkforceCost
AutomaticHRDataWarehouse
DataIntegrationBlueprint
IntegratedTalentMgmtScorecard
HRPowerTools(i.e.ROICalculator)
HRTalentManagementDashboards
WorkforceandHRKPIMetrics
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QuestionandAnswer
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ContactInformation:
HumanCapital
Management
Institute
www.hcminst.com
JosephMorrissey,VPSalesjoseph.morrissey@hcminst.com
GrantCooperstein,VPAnalyticsgrant.cooperstein@hcminst.com
MounPeterson,DirectorofResearch
moun.peterson@hcminst.com
Formoreinformationaboutthefollowingproductsandservices,pleasevisitthelinksbelow:
SOLVE WorkforceProductivityReports HumanCapitalFinancialStatements
Training HumanCapital
Metrics
Handbook Thought
Leadership
WorkforceIntelligence
ConsortiumGroup@HCMI
HumanCapital
Management
Institute 31
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